Beijing is worried about debt, but more worried about slowing growth

CHINA FINANCIAL - Report 26 Jul 2021 by Michael Pettis

• GDP growth in the second quarter continues to slow, but not by as much as many analysts seemed to think.

• While I continue to expect China’s reported GDP growth for the year to be between 6 percent and 8 percent, I am starting to believe that it will be much closer to 8 percent than to 6 percent. This is because there are signs that Beijing will allow investment in infrastructure and the property sector to pick up speed in the second half of the year.

• If I am right, we should expect China’s debt-to-GDP ratio to rise by 3-4 percentage points in 2021, after a 6-percentage-point rise in 2019 and a 25-percentage-point rise in 2020.

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